What is Supertrend Indicator ?

Supertrend indicator was developed by Olivier Seban. It works at all the time frames i.e. 1 minute, 5 minutes or 15 minutes.

  • The Supertrend Indicator is simply one of the easiest trend trading system. Furthermore, it is very effective.
  • Supertrend, as the name suggests, is a trend following indicator. It works much better than moving averages and MACD which are also useful trend following indicators.
  • Supertrend is a trending indicator. Moreover, just like all trending indicators, it works well in trending markets (i.e. in uptrend and downtrends).
  • Supertrend is built using two parameters, and the commonly used one are 10 and 3.
  • If you are a day trader, then you can use other indicators along with Supertrend indicator to confirm the signal.

Supertrend Indicator Formula and Calculation

  • Supertrend indicator shows trend direction. In addition,it provides buy or sell indicators.
  • It predicts using a mixture of the average price rate in today’s period along with a volatility indicator.
  • The ATR indicator is useful in form of a volatility indicator.

Calculation of Values as per Formula :

BASIC UPPERBAND = (HIGH + LOW) / 2 + Multiplier* ATR

BASIC LOWERBAND = (HIGH + LOW) / 2 – Multiplier* ATR

FINAL UPPERBAND = IF ((Current BASIC UPPERBAND< Previous FINAL UPPERBAND) and (Previous close < Previous FINAL LOWERBAND)) THEN (Current BASIC LOWERBAND)                                                                   ELSE Previous FINAL LOWERBAND)

FINAL LOWERBAND = IF( (current BASIC LOWERBAND > Previous FINAL LOWERBAND) and (Previous Close < Previous FINAL LOWERBAND) ) THEN (Current BASIC LOWERBAND ) ELSE Previous FINAL LOWERBAND )

SUPERTREND = IF (Current Close <= Current FINAL UPPERBAND) THEN current FINAL UPPERBAND ELSE Current FINAL LOWERBAND

Calculation of Average True Range :

[(Prior ATR × 13) + Current TR] / 14

Here, 14 indicates a period. Therefore, the derivation of ATR is by multiplying the previous ATR with 13. Furthermore, add the latest TR and divide it by Period. 

How to Use Supertrend Indicator ? 

To use Supertrend Indicator, you can follow these steps:

  1. Open the chart of a particular stock you want to trade.
  2. Set the time interval of 10 minutes for intraday trading. For that you can use any good charting software.
  3. Insert Supertrend as your Indicator.In addition, keep setting as 10 & 3. In fact, it is possible to insert your own setting as well.
  4. Now start tracking when signals are in your favor. Furthermore, follow the arrows for the signals to buy and sell the stocks.

Using Supertrend indicator, you can analyse any stocks technically. In fact, it gives signals to go for long or short on confirmation of trend. Furthermore, it works best in a trending market. For instance, the uptrend or downtrend can be known in any type of market.

While using super trend indicator, it is better to put stop loss. In fact, you can use the indicator line for stop loss. In addition, you can also trail it as the price move in either direction. Therefore, using Supertrend along with your stop loss pattern is the best way to earn good returns in trading.

Supertrend Trading Strategy for Buy and Sell :

The main crux for the intraday traders is to identify buying and selling signals in Supertrend.

Supertrend represents the downtrends and uptrends. In fact, the flipping of the indicator over the closing price indicates signal.

  • Green colour indicates a buy signal
  • Red color indicates a sell signal
  • A sell signal occurs when it closes above the price. 
[ You also like : Best Stock Screener ]

Double Supertrend Strategy :

Follow the steps given below to apply this strategy for Intraday trading.

  • This strategy works above 15 minutes.
  • Input Supertrend indicator with parameter 2 and10(green colour).
  • Input another Supertrend indicator with parameter 3 and 10 (red colour).

 For Buy signal :

When it generates buy signals, you can put your stop loss at red Supertrend indicator, as shown in below image.

Supertrend Strategy Buy Trade

 For Sell Signal :

When it generates sell signals, you can put your stop loss at the red Supertrend indicator, as shown in below Image.

Supertrend Strategy Sell Trade

Note: You can use 4, 10 parameter with 200 EMA in single super trend for best results in Nifty.

[ You also like : How to pick stock for Day Trading ? ]

Advantages of Supertrend Indicator 

As per many experts, Supertrend indicator is best to use in combination with other indicators like MACD and RSI.

  • The best thing about Supertrend is it sends out accurate signals.
  • This indicator sends signals on precise time.
  • It is available on various platforms free of cost.
  • The indicator offers quickest technical analysis to intraday traders.
  • Easy for intraday traders to make faster decisions.
  • It is easy to use and understand.

Disadvantages of Supertrend Indicator 

  • The Supertrend indicator is not appropriate for all the situations.
  • It works when the market is trending.
  • Supertrend uses only the two parameters of ATR and Multiplier.They are not sufficient under certain conditions to predict the accurate direction of the market.

Note: Supertrend indicator is not accurate for all the situations. It shows the different results for different stocks. Before using this indicator for trading, one should backtest it by applying different parameters for different stocks.

SuperTrend Buy Sell

[ Must Read : Risk Management ]

Supertrend AFL for AmiBroker

_SECTION_BEGIN("NTA Best SuperTrend AFL");

SetChartOptions( 0, chartShowArrows | chartShowDates );
Plot( C, "Close", ParamColor( "Color", colorBlack ), styleNoTitle | ParamStyle( "Style" ) | GetPriceStyle() );

SetBarsRequired( 100000, 0 );

atr2 = Param( "ATR1 Factor", 3, 1, 5, 0.1 );
per2 = Param( "ATR1 Period", 10, 3, 100, 1 );
atr1 = Param( "ATR2 Factor", 5, 1, 20, 0.1 );
per1 = Param( "ATR2 Period", 10, 3, 100, 1 );


SetPositionSize( 1, spsShares );

UpBand1 = ( H + L ) / 2 + ( atr1 * ATR( per1 ) );
DnBand1 = ( H + L ) / 2 - ( atr1 * ATR( per1 ) );
indi1 = ATR( per1 );
RessArray = SuppArray = Null;
trend[0] = 1;
changeOfTrend = 0;
flag = flagh = 0;

UpBand2 = ( H + L ) / 2 + ( atr2 * ATR( per2 ) );
DnBand2 = ( H + L ) / 2 - ( atr2 * ATR( per2 ) );
indi2 = ATR( per2 );
RessArray2 = SuppArray2 = Null;
trend2[0] = 1;
changeOfTrend2 = 0;
flag2 = flagh2 = 0;


for ( i = 1; i < BarCount; i++ )
{

trend[i] = 1;
trend2[i] = 1;


if ( Close[i] > UpBand1[i-1] )
{
trend[i] = 1;

if ( trend[i-1] == -1 )
changeOfTrend = 1;
}
else
if ( Close[i] < DnBand1[i-1] )
{
trend[i] = -1;

if ( trend[i-1] == 1 )
changeOfTrend = 1;
}
else
if ( trend[i-1] == 1 )
{
trend[i] = 1;
changeOfTrend = 0;
}
else
if ( trend[i-1] == -1 )
{
trend[i] = -1;
changeOfTrend = 0;
}

if ( Close[i] > UpBand2[i-1] )
{
trend2[i] = 1;

if ( trend2[i-1] == -1 )
changeOfTrend2 = 1;
}
else
if ( Close[i] < DnBand2[i-1] )
{
trend2[i] = -1;

if ( trend2[i-1] == 1 )
changeOfTrend2 = 1;
}
else
if ( trend2[i-1] == 1 )
{
trend2[i] = 1;
changeOfTrend2 = 0;
}
else
if ( trend2[i-1] == -1 )
{
trend2[i] = -1;
changeOfTrend2 = 0;
}

if ( trend[i] < 0 && trend[i-1] > 0 )
{
flag = 1;
}
else
{
flag = 0;
}

if ( trend[i] > 0 && trend[i-1] < 0 )
{
flagh = 1;
}
else
{
flagh = 0;
}

if ( trend[i] > 0 && DnBand1[i] < DnBand1[i-1] )
{
DnBand1[i] = DnBand1[i-1];
}

if ( trend[i] < 0 && UpBand1[i] > UpBand1[i-1] )
{
UpBand1[i] = UpBand1[i-1];
}

if ( flag == 1 )
{
UpBand1[i] = ( H[i] + L[i] ) / 2 + ( atr1 * indi1[i] );;
}

if ( flagh == 1 )
{
DnBand1[i] = ( H[i] + L[i] ) / 2 - ( atr1 * indi1[i] );;
}


if ( trend2[i] < 0 && trend2[i-1] > 0 )
{
flag2 = 1;
}
else
{
flag2 = 0;
}

if ( trend2[i] > 0 && trend2[i-1] < 0 )
{
flagh2 = 1;
}
else
{
flagh2 = 0;
}

if ( trend2[i] > 0 && DnBand2[i] < DnBand2[i-1] )
{
DnBand2[i] = DnBand2[i-1];
}

if ( trend2[i] < 0 && UpBand2[i] > UpBand2[i-1] )
{
UpBand2[i] = UpBand2[i-1];
}

if ( flag2 == 1 )
{
UpBand2[i] = ( H[i] + L[i] ) / 2 + ( atr2 * indi2[i] );
}

if ( flagh2 == 1 )
{
DnBand2[i] = ( H[i] + L[i] ) / 2 - ( atr2 * indi2[i] );
}

if ( trend[i] == 1 )
{
RessArray[i] = DnBand1[i];

if ( changeOfTrend == 1 )
{
RessArray[i-1] = SuppArray[i-1];
changeOfTrend = 0;
}
}
else
if ( trend[i] == -1 )
{
SuppArray[i] = UpBand1[i];

if ( changeOfTrend == 1 )
{
SuppArray[i-1] = RessArray[i-1];
changeOfTrend = 0;
}
}

if ( trend2[i] == 1 )
{
RessArray2[i] = DnBand2[i];

if ( changeOfTrend2 == 1 )
{
RessArray2[i-1] = SuppArray2[i-1];
changeOfTrend2 = 0;
}
}
else
if ( trend2[i] == -1 )
{
SuppArray2[i] = UpBand2[i];

if ( changeOfTrend2 == 1 )
{
SuppArray2[i-1] = RessArray2[i-1];
changeOfTrend2 = 0;
}
}

}

prevH = TimeFrameGetPrice( "H", inDaily, -1 );

prevL = TimeFrameGetPrice( "L", inDaily, -1 );
Cond01 = 1;//H<PrevH;
Cond02 = 1;//L>PrevL;


Buy1 = Cross( O, Ref( RessArray, -1 ) ) AND Ref( RessArray, -1 ) > 0;
Sell1 = Cross( Ref( SuppArray, -1 ), O ) AND Ref( SuppArray, -1 ) > 0;
Buy = Buy1 AND Cond02;
Sell = ( Ref( SuppArray2, -1 ) > O AND Ref( SuppArray2, -1 ) > 0 );
Buy = ExRem( Buy, Sell );
Sell = ExRem( Sell, Buy );

Short = Sell1 AND Cond01;
Cover = ( O > Ref( RessArray2, -1 ) AND Ref( RessArray2, -1 ) > 0 ) ;
Short = ExRem( Short, Cover );
Cover = ExRem( Cover, Short );


Plot( RessArray, "First Support", colorGreen );
Plot( SuppArray, "First Resistance", colorRed );
Plot( RessArray2, "Second Support", colorGreen );
Plot( SuppArray2, "Second Resistance", colorRed );

Title = NumToStr( DateTime(), formatDateTime ) + " O " + O + " H " + H + " L " + L + " C " + C +
"\nFirst Support: " + RessArray + " First Resistance: " + SuppArray + " Second Support: " + RessArray2 + " Second Resistance " + SuppArray2;


PlotShapes( IIf( Buy, shapeSquare, shapeNone ), colorGreen, 0, L, Offset = -40 );
PlotShapes( IIf( Buy, shapeSquare, shapeNone ), colorLime, 0, L, Offset = -50 );
PlotShapes( IIf( Buy, shapeUpArrow, shapeNone ), colorWhite, 0, L, Offset = -45 );
PlotShapes( IIf( Sell, shapeDownArrow, shapeNone ), colorRed, 0, H, Offset = -45 );
PlotShapes( IIf( Short, shapeSquare, shapeNone ), colorRed, 0, H, Offset = 40 );
PlotShapes( IIf( Short, shapeSquare, shapeNone ), colorOrange, 0, H, Offset = 50 );
PlotShapes( IIf( Short, shapeDownArrow, shapeNone ), colorWhite, 0, H, Offset = -45 );
PlotShapes( IIf( Cover, shapeUpArrow, shapeNone ), colorBlue, 0, L, Offset = -45 );

_SECTION_END();

Super Trend Indicator Live Chart :

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